big trailer dealing with the sec staff

Research Conducted by Arthur Mboue 1

Big Trailer ofDEALING EFFECTIVELY WITH SEC STAFF;

LESSONS LEARNED (Maximizing communication tools between the investing public and the staff of the SEC)

ByArthur Mboue, MBA, JD, Ph D,… (just held because of who I am, enough is enough)


Learning Objective

• Next slides are foundation to assess rules, reasons and rationalities behind SEC reporting


Roles & Reasons of Market Related Information • Role

– Investing public’s evaluation tool (potential return on the investment)

– Investing public’s monitoring tools (use of their investment)

Reasons for market related information• Asymmetric of info (only managers know the true value of

the company)• Separating of ownership & control (capital providers

segmentation of decision making rights/provisions)


Rationality for Disclosures Regulation

• Financial externalities• Agency costs• Economies of scale (absence of regulation &

increased public information)• Real Externalities


Unanswered Question of the Disclosure Regulation1. Why is disclosure regulation present in advanced and developed

economies such as the US? What are the specific market failures in the US capital markets that cause regulation and sweeping changes in corporate governance policies and confidence in the market place?

2. Does disclosures regulation address the identified market failures and externalities?

3. What are regulators objectives and incentives? The political process underlying regulation, especially in the U.S is an important determinant of the final rules and outcomes of the marketplace.

4. What are the aggregate costs associated with capital market regulations? While regulations are likely to have economic benefits how do these benefits can be compared to the expected costs of the regulation? Are there instances where the costs of implementation outweigh the desired benefits at least short term? Is the Dodd-Frank financial reform Act of 2010 implementation too costly from a social welfare perspective and short in term of return on investment? More data are needed to address these important issues with exactitude for future decision making


Learning Objectives

• Next slides will help to understand the reason for the creation of SEC and its (it and its staff) mission


Chronological Events Impacting Securities Regulation Dates EventsPRE 1930- UNREGULATED PERIODMarch 8, 1817 NYSE is funded12/22/1886 1ST MEETING, American Association of Public Accountants May 26, 1896 DJIA is fundedMarch 10, 1899

Delaware General Corporation Law (1st general incorporation law in Delaware) was enacted to compete against NY

Oct. 29, 1929 Stock market crash of 1929 leading to Great depression1930 Uniform Sales of Securities Act was proposed on October 14-19, 1929 and adopted the next year by just a

handful of jurisdictions

FORMATIVE PERIOD TO FIX 1929 STOCK MARKET CRASH1932 • Reconstruction finance corporation Act signed on January 22, 1932

• Banking Act signed on Feb 27, 1932• US senate starts investigating Wall Street-Pecora (chief counsel, Ferdinand Pecora) investigation

begins on March 4, 1932 about the causes of the Wall Street crash of 1929 1933 • NYSE starts requiring audited financial statement (Feb 6, 1933)

• Federal Securities law was drafted with the Securities Act of 1933 approved on May 27, 1933• Wall Street strike, Mid 1933 • Glass-Steagall Act (Farm Credit Act & US Banking Act of 1933 which established FDIC), June 16, 1933

1934 • Gold Reserve Act is established to give government control over fluctuation in the value of the order on January 30, 1934

• SEC is created with the SEA of 1934 on June 6, 1934 • SEA dealing with transactions became effective 60 days later, August 5, 1934


Chronological Events Impacting Securities Eventsdates events

1934 • Import-Export bank of Washington is established to encourage commerce between US and foreign nations, 2/2/1934• Corporate bankruptcy Act is passed to allow a corporation facing bankruptcy to reorganize or distribute assets, 6/7/1934• Form 10 (primary form) is adopted (December 1934)

1935 • Social Security Act is signed to guarantee pensions to those retiring at 65 with contributions (August 14, 1935)• Public Utility Holding Act (Wheeler Rayburn Act) is enacted on August 26, 1935• Division of enforcement, division of Corporation Finance and the office of chief Accountant are opened (1 st Chief, Carman G

Blough), December 1935

1936 • Accounting professional joins the London Association to become the AICPA• American Institute of Accountants Publication of Examinations of financial statements did introduce the GAAP

1937 • SEC accounting series releases publication starts (1/6/1937)

1938 • NYSE Governance is reorganized(10/31/1938)

1939 • Trust Indenture Act (August 3,1939)• NASD is created on September 18, 1939• Accounting Research Bulletins starts (September 1939)

1940 • Investment company Act of 1940 (8/22/1940 amended on 1/3/2012)• Investment Adviser Act of 1940 (8/22/1940 amended on 01/03/2012)

1942 • SEC rule 10b-5 extends prohibition of fraud to the purchase of securities (May 1942)

1943 • Trading floor opens to women (7/12/1943)

POST WAR PERIOD, 1946-19591950 Model Business Corporation Act (11/1950)

MODERN PERIOD, 1959 TO PRESENT

1970 • Securities Investor Protection Corporation (12/30/1970 amended on 01/03/2012)

1973 • FASB is created (found in 1972 but starts operation on 7/21/1973)

1975 • MSRB is created on July 21, 1975 as Tower amendment• DCF publishes Staff Accounting Bulletins (November 1975)


Chronological Events Impacting Securities Regulation dates events

1977 FCPA is enacted, 12/19/1977

1982 Regulation D is enacted, 4/15/1982

1990 Financial Reporting Manual is published for the first time in 1990

2000 FD regulation is enacted (6/15/2000)

2002 SOX Act (7/30/2002)

2003 PCAOB (1/16/2003)

2005 Energy Policy Act of 2005 (August 8, 2005) effective Feb 8, 2006

2007 Financial Industry Regulatory Authority (7/30/2007)

2009 FASB Accounting standards Codification replaces the hierarchy of GAAP (7/1/2009)

2010 Dodd Frank Act of 2010 (7/21/2010)

2017 Attack on Dodd Frank Act of 2010 (will it survive? I don’t know)


A-Organizational Structure of the SEC

11

SEC’s Defined Mission• The mission of the SEC is to protect investors, maintain fair,

orderly and efficient markets and facilitate capital formation• Its role: • The SEC has full legal authority to set guidelines used by CPA

for audited financial statements works submitted to the commission.

• SEC can bar any accountant or securities lawyers from the SEC cases after administrative court decision and commission votes– You can appeal the SEC judge barring notice to the full commission

(vote ruling) • Although SEC has delegated some these duties to professional

accountant groups, it still uses veto power (or line item veto) to object or change this group’s proposals and opinions.

11Research Conducted by Arthur Mboue

SEC Vision• Promote the investing public trust in its financial regulatory

power by– Focusing on transparent disclosure to the investing public of the risk

related to their investments activities– Overseeing most market participants:

• 18 national securities exchanges (NYSE, NASDAQ,…)• 10 credit rating agencies (Moody Services, Standard & Poors,…)• Public company accounting oversight Board (PCAOB)• Financial industry Regulatory Authority (FINRA)• Municipal Securities Rulemaking Board (MSRB)• Financial Accounting Standards Board (FASB)

– Focusing on strengthening the market structure– Promoting disclosure of market related information– Focusing on protecting the investing public against fraud and abuses– Evaluating, promoting and maintaining appropriate market rules and

regulationsResearch Conducted by Arthur Mboue 12


Divisions Reporting to the SEC CEO• 5 divisions

Divisions Duties and/or Mission Corporation Finance

It has 2 primary missions; to see that investors are provided with materially complete and accurate information and to deter fraud and misrepresentation in the public disclosure and offering, trading, voting and tendering of securities. The division’s primary authority is derived from statutes: the SA 1933, the SEA 1934, the SOX 2002 and Dodd-Frank Act of 2010

Enforcement Conducts investigations of registered entities (corporation, broker-dealers, investment management firms) and unregistered entities (unregistered and fraudulent securities trade over the internet, assistors and abiders), recommends to the Commission actions (either in a Federal court or before a SEC administrative law judge), negotiates settlements (NPA/DPA) on behalf of the Commission, and works with criminal law enforcement agencies when warranted

Investment Management

Its mission is to minimize the financial risks to investors from fraud, mismanagement, self dealing and misleading or incomplete disclosure in the investment company and investment adviser firms and segments of the financial services industry, without imposing unnecessary costs and burdens on regulated entities

Division of Economic and Risk Analysis (DERA)

Its responsibilities are to provide economic analyses of proposed Commission actions and to assist the commission’s efforts to identify, analyze, and respond to risks and trends, including those associated with new financial products and strategies

Trading and Market ™

Its mission is to establish and maintain standards for fair, orderly and efficient markets while fostering investor protection and confidence in the markets


B-Overview of the Exchange Act and the Securities Act

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Secu

rities

Act o

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3

Secu

rities

Act

of 19

34

Securities and Exchange Commission

Born on June 6, 1934, Washington, DC Established by federal government as an independent and quasi judicial

agency Accounting and reporting for public companies

Encouraged private standard-setting body SEC requires public companies to adhere to US GAAP SEC Oversight is conducted by US Congress Enforcement Authority including

Securities Act of 1933 Securities and Exchange Act of 1934 SOX of 2002 Dodd Frank of 2010

SOX o

f 200

215

Dodd-

Frank

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Research Conducted by Arthur Mboue


Waiting to Excel Act or its Last Rite


Dodd-Frank Financial Reform ACT Overview

• Birthday– July 21, 2010

• Reasons for its birth– Financial crisis caused partially by the Washington

establishment doing or non-doing– Retirement package to 2 celebrities long time legislators

• Congressional votes– 60 to 39 Senate votes– 237 to 192 Houses of representatives votes


Dodd-Frank Financial Reform IDbirthdate Name acronym Parents Pictures of parents

& lawmakersPowerful descriptions of lawmakers

July 21, 2010

Dodd Christopher Dodd (top)

Senior CT legislators with well kept hair

Frank Frank Barney (bottom)

Senior Gay and lesbian role model who did capitalize on gay male prostitute censure

Category SEC Enforcement Actions 2016Types of Enforcement Actions

Civil cases

Administrative proceeding

Total cases

%

Stand alone

Follow on

Issuer reporting and disclosure

Fraudulent financial reporting matters, cases involving misleading statements to investors, and faulty and/or inadequate disclosure matters

21 72 10 103 11.9

Securities offering cases

Misleading and fraudulent representations to induce investors to enter into securities transactions

76 14 7 97 11.2

Broker Dealer Stock price manipulation, violations arising out of compliance deficiencies, naked short selling schemes, improper trading activities by Broker-Dealers

5 56 112 173 19.9

FCPA Bribes and kickbacks to foreign officials to assist in obtaining or retaining business as well as cases involving internal control violations

1 20 0 21 2.4

Delinquent Filing Failures to make required and or timely filings with the SEC 0 125 0 125 14.4

Investment Advisers/investment Co.

Misleading disclosures, improper fee arrangements, misappropriation of client assets, market manipulation, and other violations of the investment Advisers Act

20 78 61 159 18.3

Market Manipulation

Creating false appearance of a liquid and active market, fraud involving formant microcap shell companies and other disruptive trading activities

16 14 3 33 3.8

Insider Trading Buying or selling a security in breach of a fiduciary duty or other relationship of trust and confidence while in possession of material, nonpublic information about the security

29 16 0 45 5.2

Miscellaneous 3 6 2 11 1.3

Public Finance Abuse

Formerly known as Municipal Securities & Public Pensions, Violations of MSRB rules including Municipal bonds,…

5 92 0 97 11.2

NRSRO 0 2 0 2 0.2

SRO/Exchange

Transfer Agent Violations of Federal Regulation of Transfer agent 0 2 0 2 0.2

Totals 176 497 195 868 100%


20

• Number of SEC Enforcement Actions w/o Follow-on & Contempt Proceedings

Reported Number of cases

w/o Follow on & Contempt proceedings

Civil Penalties & Disgorgement orders ($ Billion)

Total ($ Billion)

Penalties Disgorgement

2009 664 495 0.345 2.09 2.435

2010 681 431 1.03 1.82 2.85

2011 735 482 0.928 1.878 2.806

2012 734 494 1.021 2.083 3.1

2013 676 469 1.167 2.257 3.4

2014 755 507 1.378 2.785 4.16

2015 807 639 1.175 3.019 4.19

2016 868 673 1.273 2.809 4.082

*In 2013, the U.S SEC stopped including contempt proceedings (i.e actions to enforce payment of previously imposed monetary penalties or compliance with a prior enforcement action) *Follow on actions administrative actions are actions used to impose additional sanctions against individuals, such as bars from practicing, based on prior litigated misconduct* In 2015, 94 % cases were concurrent


Commission authorize enforcement staff to initiate civil action or administrative proceedings

Civil Forum

Complaint filed in US District Court describing misconduct, identifying the laws and rules violated, and identifying the sanction or remedial action sought (SEC obtained 69% success against defendants, here)

Judge: US Judge paid by US with excellent job security

Jury trial: mostly

Appeal Judges: US judges paid by US with excellent job security

Administration Proceedings

Order of proceedings (SEC administrative law judges) instituted describing misconduct, identifying the laws and rules violated, and identifying the sanction or remedial action sought (SEC prevail against around 90% of defendants here)

Judge: Administrative law judge, SEC staff, job security controlled by SEC

Jury trial: Never

Appeal Judges: SEC commissioners same people who recommend the case

Procedures: interrogations, depositions, request for admission, summary judgment, right to trial by jury, dispositive motions, appeal motions

Schedule: very long process (years)

References: Federal Rules of civil procedures, Federal Rules of evidences, new policies on individual accountability for corp wrongdoing

Procedures: Order Instituting Proceeding (OIP); Brady and Jencks obligation (turn over certain information)-limited discovery; dispositive motions; Respondent appeal to an Article III court

Schedule: expedient process (ALJs initial decision must be issued within 300 days after service of the OIP

References: SEC Rules of Practice, SEC Enforcement Manual (6/4/2015)

Review conducted by staff of the division of corporation finance (no news here is good news, it does not mean that they did not review your filings)

Comment period periods (unload and corresp) between the staff and the company executives; any resolution?

Clear, case closed

No enforcement, case closed

No, case sent to the division of enforcement

Enforcement recommendation is going for a vote

yes

At this stage, you will deal with staff of the disclosure team including office of the

chief accountant, all negotiations will not salvage

your reputation or require any monetary settlement, focus on this step to save

Here, you will deal with the staff of enforcement; they will investigate and need

your cooperation in providing all requested

material. A good cooperation will bring a closure of your case with

prosecution or it will help for some types of out of court

settlements. They will determine what kind of forums your case will be

tried, that itself can result in saving

Once your case has been filed, there is a lot of speculation about your guilt’s and the

company can lose market value as a result of these

speculations. There is a way to settle this case but you will deal

with the prosecuting team of the US attorney (US DoJ) if your

case was sent before the US court (left) or the SEC

prosecuting staff (right) if your case was kept in their home

court. They use different corporate wrong doers

settlement guidelines. Once you enter this phase, you are guilty before proving to the

media and others that you are innocent. Any settlement deal

(without admission of guilt) with the prosecuting team will not keep the investing public

from trying to find other skeletons in your disclosure. It

is why it is difficult to determine when to start any settlement negotiation with either the SEC staff or the US

DoJ, not just to boost your market share price and reduce costs of litigation but also the

market confidence in your company value and disclosure

Leads

Obtains through

Division of enforcement surveillance and other division of SEC

Self- regulatory organizations and other securities industry sources

Media reports Investor

compliance tips Academy Research

community

Inquiry

MUI is conducted to

evaluate information to

determine whether an

investigation is warranted

Non public

No subpoena authority

Investigations

Review of

Document Books and

records Financial data Witness

testimony Other

relevant information

w/ or w/o subpoena authority

Enforcement staff determine what kind of forum to recommend

Factors:

Material Costs Message to send Tactical

consideration Type of

sanctions discretional

criteria

Promising leads may become matters under inquiry (MUI)

If evidence merits investigation

Promising leads may also directly result in an investigation

21

Dealing with Staff, Step by Step



No Action Letters (NAL)

• Request made by the company to the chief counsel of the division responsible for administering the statutes or SEC rules

• The SEC no action letter (NAL) process enables the SEC to have it both ways– Enjoy the enforcement benefits of promulgated rules

and standards– Depart from those norms without promulgating new

SEC rules or ever formally explaining in an SEC release its change in position


Last Step

• It takes days (up to 15) for the application to be posted on the Federal Register giving interested parties the opportunity to request a hearing on the proposed relief or rules.

• The notice period typically lasts from between 25 and 28 days

• If no hearing has been requested by the company applicant or by the commission acting on its own motion, the order will typically be granted within two days after the notice period expired


Length of Time to Respond to Written Request for NAL and the like

2010 2011 2012 2013 2014 2015 20160%

50%

100%

150%

200%

250%

300%

350%

CF- Corporation Finance; TM- trade and Markets; IM-Division of Investment Management Adapted from the SEC performance Report 2016


Amanda Ravitz in charge of office 10, Electronic and Machinery, in her deliberation conference room

SEC Comment Letters

DUE PROCESS, REVIEW AND NEGOTIATION


Number of SEC Comment Letters Year by Year

2011 2012 2013 2014 2015 20160

2000

4000

6000

8000

10000

12000

SEC UploadSEC overall

Overall is upload plus corresp, 2016 is estimated to 6/30/2016, it is not reliable www.sec.gov search corresp was 8000+ (and 7400) but did not have time to eliminate some

http://www.sec.gov/


SEC Filing Review Performances

2008 2009 2010 2011 2012 2013 2014 2015 20160%

10%

20%

30%

40%

50%

60%

Percent of Issuers Review: corporation and Investment company portfolios

Perc

ent o

f Iss

uers

First time above 50, but investment reviewed are too lowData from the SEC FY 2016 performance report


SEC Staff Comment by NumberNumber of comment letters issued to complete review

1 letter 2 letters 3 letters 4+ letters0%

10%

20%

30%

40%

50%

60%

70%

80%

% of SEC staff reviews

% o

f SEC

staff

revi

ews

Time to issue initial comments on securities Act filings

20082009

20102011

20122013

20142015

2016, est.

0

5

10

15

20

25

30

35

Time to issue initial Comments

num

ber o

f day

s

Data from SEC FY 2015 Performance reportDeloitte data, 2016


Source for Comments Letter• SEC Staff review of company filed documents (10-k, 10-Q, 8-K,…)• SEC Staff review of company website and other posted

documents, interviews of top management,… (consistency is the rule)

• SEC staff review of Analysts calls,…(FD is the rule)• Tips from Academic researcher, other law enforcement and

external reviewers about the company disclosures• Financial press releases (news articles,…)• Company management confession to the SEC• PCAOB-inspection sharing documents with the SEC• Whistleblower (the business is wining more court awards by

consequent more freedom to talk to the regulators for checks,…)


Learning Objective

• Next slides will help you to understand the last step of negotiation with the staff before court ruling. You must act and look honest in order to win a cooperation agreement with the prosecution


Corporate NPA and DPA

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160

5

10

15

20

25

30

35

40

45

26

8

14

24

39

1921

40

3438

2830

25

35

number of agreements*With DoJ tax Swiss Bank Program, 2015 was 102Based on GibsonDunn 2016 data

*


Total Monetary Recoveries Related to NPAs and DPAs

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Tota

l Mon

etar

y Re

cove

ries

Based on GibsonDunn 2016 data


ComparisonStarting date

DPA NPA Numbers of agreements

References

SEC (called seaboard)

2010 • Not filed with the court• No complaint• Includes statement of facts• Tells statutes of limitation

(Sols)• Financial penalties• Deniable in collateral

litigation

• Not filed w/ court, availability• No complaint• May include statement of

facts • Indefinite term, until related

litigation concludes• Tells SOLs, at least until the

related litigation concludes• Deniable in collateral litigation

7 or more SEC Enforcement manual

DoJ Since 1993?but prevalent since 2002

• Filed with the court as public record

• Accompanies criminal info• Includes statement of facts• Term limited• Tells SOLs• Financial penalties• Rarely deniable in

collateral litigation

• Not filed w/ court but often public

• No charging documents• Includes statement of facts• Usually term limited • Tells Sols• Financial penalties common• Rarely deniable in collateral

litigation

308 from January 2000 to 1/6/2015

US Federal Sentencing Guidelines


Comparison NPA and DPANon Prosecution Agreement Deferred Prosecution Agreement

Definition SEC or DoJ agrees to forgo prosecution in exchange for substantial monetary penalties, disgorgement, admission of responsibility (maybe required), agreement not to commit further violation of law, robust remediation, implementation of a program and cooperation to tell your story to the jury/judge as witness against to others including former co-workers, conspirators or violators

Case filed No, not all the time Yes

Judge signature It is not required Must be signed by the judge

Nature of seriousness of offenses Less serious More seriousWrongdoing within corporation Less pervasive More pervasive

Similar misconduct Less history some historyDisclosure of wrongdoing and willingness to cooperate

More cooperation Less cooperation

Preexisting compliance programs More effective Less effectiveRemedial actions More actions Fewer actionsCollateral consequences Fewer consequences Greater consequencesProsecution of responsible individuals

More adequate Less adequate

Civil or regulation enforcement action

More adequate Less adequate


Closing

• Next slides are filled with a table to analyze how registrants are and summary of the deals with the SEC


How Compliant are they, SEC registrants?2010 2011 2012 2013 2014 2015 2016

Number of SEC registrants 35,300 31,500 35,450 34,800 36,350 36,500 33,700

Investment advisers 11,500 11,800 11,700 11,000 12,000 12,000 11,900

Mutual funds 7,800 4,200 9,700 9,700 10,500 11,000 10,500

Broker Dealers 5,400 5,400 4,500 4,600 4,500 4,000 4000

Transfer Agent 600 600 450 460 450 400 400

Public Companies 10,000 9,500 9,100 9,500 9,000 9100 9,200

Annual SEC filed w/o follow on and contempt charges

431 482 492 469 507 639 673

Actions with public companies as defendants /respondents

53 51 44 40 54 84 92


SUMMARY OF DEALINGS EFFECTIVELY WITH THE SEC STAFF

DCF and IM staff are in charge (some CAO staff)

DCF staff are in charged Enforcement staff are in charged

Enforcement staff and court staff are in charged

Pre-filing (more than 15 days should be allocated)

After filing of 10_K, 10-Q or 8-K,.. . and its posting takes average 29 days for the SEC to issue its first comment

It will be upload and corresp exchange between the SEC disclosure operational team and the company disclosure team, average 41 days should be allocated from the 1st comment to the completion

20 days later these letters will be posted

Investigation and Pre-trial (it can take as long as years)

NPA (Non Prosecution Agreements) may or may not last

Deferred Prosecution Agreements-DPA (The company is charged or sued)

No Action Letters-NAL, exemptive applications, written interpretative requests,… Confidential

Treatment can be requested for up to 10 years

4 types of reviews will be conducted at the discretion of the SEC staff: Preliminary Full review Financial statements Targeted/Monitor

review

Philosophy adopted to SEC comment letters If disclosure unclear- SEC will

advise the company to provide more clarification

If disclosure is inconsistent- SEC will advise the company to provide additional or supporting data (all the company posted documents, calls, conferences, releases are review for Fair Disclosure-FD and can be used)

If the disclosure is wrong and material, it depends on the level of materiality, SEC will advise the company to correct its future filing or for extreme case, it will advise the company to restate its disclosure

The company has 10 days to respond to the SEC and can obtain 3/5 days extension

Once the company received the no further comment letter, it means that the disclosure is completed. Companies have option to disagree with the staff or no comply will face the next steps

A receipt of subpoena notice will come with the name of the SEC contact enforcement staff. The company will do its own investigation as work product. While both sides are evaluating their chances of winning during trial. It will be an opportunity for NPA

What extend NPA is Compliance, self monitoring and reporting agreements; it is why registrant must start fixing its system earlier. nIf the company wins the NPA, the agreement letter is signed by the US DoJ (US Attorney) or the Divisions of Enforcement.

Once the company is charged or sued, all agreements between both parties are signed by the sitting judge. It can be court appointed monitoring system imposed. The company wins the DPA, the judge (court) must accept it and sign it.

Filing of 10-K, 10-Q, 8-K,..

1st comment letter sent by the SEC

Completion of the SEC comment letter phase

Non compliant case sent to the enforcement team

Subpoena phase

Trial PHASE

SEC Comment letter- additional documents/information UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-3030 DIVISION OF CORPORATION FINANCE October 28, 2010 Keith S. Sherin Chief Financial Officer General Electric Company 3135 Easton Turnpike Fairfield, Connecticut 06828-0001 Re: General Electric Company Form 10-K for the Fiscal Year Ended December 31, 2009 Filed February 19, 2010 Form 8-K filed October 15, 2010 File No. 001-00035 Dear Mr. Sherin: We have reviewed your response letter dated October 14, 2010 and additional filings and have the following comment. In our comment, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by providing the requested information, or by advising us when you will provide the requested response. If you do not believe our comment applies to your facts and circumstances, please tell us why in your response. After reviewing the information you provide in response to this comment, we may have additional comments. Keith S. Sherin General Electric Company October 28, 2010 Page 2 Form 8-K filed October 15, 2010 Exhibit 99 1. We see on page 2 of your earnings release that you increased reserves by $1.1 billion related to your former Japan consumer finance business that is included within discontinue operations. We additionally note the statements made by Keith Sherin during the October 15, 2010 Earnings Call, which discussed that you had adjusted your reserve estimate from the low end of the range of losses to your "best estimate and the ultimate exposure." Please describe for us the facts and circumstances, which occurred during the quarter ended September 30, 2010, which resulted in you increasing the loss reserves from the minimum amount of the range to a better estimate of $1.7 billion under FASB ASC 450-20-30-1. As part of your response, please include a discussion describing the timing and nature of the specific events and circumstances, which caused you to increase the reserve by $1.1billion during the quarter ended September 30, 2010 and explain why these facts and circumstances were not considered in your reserve estimates for prior quarters in the fiscal year ended 2010. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company's disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. You may contact Kevin Kuhar, Accountant, at (202) 551-3662 or me at (202) 551-3212 if you have questions regarding comments on the financial statements and related matters. You may also contact Martin James, Senior Assistant Chief Accountant, at (202) 551-3671 with any other questions. Sincerely, Jeff Jaramillo Accounting Branch Chief



This NAL will not be empty at GE in the future, the investor communication is in great shape at GE and perfecting itself.